Germany, France march out of recession
Germany and France rebound unexpectedly out of recession with a 0.3 pct economic growth in the second quarter.Brussels – Germany and France led a surprise rebound out of recession on Thursday, helping drag the 16-nation eurozone back towards positive territory in a further sign a global economic recovery is taking hold.
Official figures also showed Portugal and Sweden had exited recession in the second quarter of the year although analysts warned that a painful legacy, namely in the form of rising unemployment, would not be shaken off so easily.
"These results are not the end of the crisis but the beginning of the end of the crisis," said Portuguese Prime Minister Jose Socrates after his country's economy grew 0.3 percent in the three months to June.
Germany and France, the two largest economies in the 16-nation eurozone, also enjoyed growth of 0.3 percent in the second quarter – snapping a period of negative growth dating back to early 2008.
Sweden's economy neither grew nor contracted in the second quarter, officially ending its shrinkage according to the most popular definition of a recession as two consecutive quarters of economic contraction.
The news was particularly welcome for German Chancellor Angela Merkel ahead of polls next month as Europe's biggest economy has not seen positive growth since the first quarter of 2008. Analysts had forecast a 0.2 percent drop.
The figures from France were equally unexpected as the national statistics office INSEE had forecast a 0.6-percent contraction.
"We have come back to positive growth," said Finance Minister Christine Lagarde, welcoming what she described as "extremely surprising" figures.
But Lagarde warned the outlook for unemployment would "remain difficult," with her ministry saying private sector job losses could reach 591,000 in 2009.
Also on Thursday, Brussels second-quarter growth figures for the eurozone showed a contraction of 0.1 percent – far better than the expected 0.4-percent drop and compared with a 2.5 percent downturn in the first quarter.
European Central Bank chief economist Juergen Stark said that growth in the eurozone could return sooner than expected.
But he too warned against premature optimism.
"What we are seeing is based primarily on stimulus measures by governments and the re-stocking of warehouses. Seen in that light, we cannot count on a durable return to a growth course."
Swedish Finance Minister Anders Borg said last week that his country's results showed "clear signs of a stabilisation" but warned that the economy still faced "a long, drawn-out road to recovery."
Marc Touati, a Paris-based analyst for Global Equities, warned there could be more "negative" surprises ahead as the euro strengthens, interest rates creep back up and the impact of stimulus measures wears off.
"The really good news in this lies in the fact that, contrary to consensus forecasts going back a few weeks, a catastrophe along the lines of the 1930s Great Depression has been avoided," he said.
Figures elsewhere in Europe showed many countries still firmly in the grip of recession, such as Slovakia, whose economy contracted by 5.3 percent on a 12-month basis, or the Netherlands, now in its longest-ever recession.
"The (eurozone) economy is still contracting (but) the situation is much better than we expected in the spring," European Commission spokesman Ton Van Lierop told reporters in Brussels.
"The sharpest contractions in activity seem to be behind us," he added.
Britain, which is outside the eurozone, released figures on Wednesday showing its economy shrank 0.8 percent while unemployment hit a 14-year high.
But Business Secretary Peter Mandelson, a former EU trade commissioner, said that recovery on the continent was also "good news for us here in Britain" as it would boost export markets for British manufacturers.
Europe's main stock markets all rose following the upbeat results.
London's benchmark FTSE 100 index closed up 0.82 percent while Frankfurt's DAX 30 gained 0.95 percent and in Paris the CAC 40 added 0.49 percent.
The rises followed a rally in US stocks, after a Fed statement said that the US economy was "levelling out."
AFP / Expatica